COVID-19 UPDATE: White House announces alliances to vastly expand testing in next month (8mm/month, Federal). And rising opportunity cost of being "undecided" as S&P 500 100 points higher than 50% retrace.

COVID-19 remains a global crisis and we realize that many people need to keep up with COVID-19 developments, particularly since we are moving into the more critical stage ("restart economy"), so feel free to share our commentary to anyone who has interest.


The White House briefing focused on the rapid expansion of testing capacity underway in the US.  According to Admiral Giroir (designated to coordinate COVID-19 testing), the US will be able to conduct 8 million tests per month (federal level) by next month with Abbott Labs, LabCorp, Quest Diagnostics providing additional testing. In short, the US is on track to conduct 500k-750k tests per day (with private sector additions).  For policymakers, and especially state governors (the NGA), this is a key gating factor to getting the economy open. Whether testing is the key factor, that doesn't matter, since it matters to policymakers.

But the broad picture is that the US private sector and policymakers have mobilized in a huge way to deal with COVID-19.  And states are mostly showing improvements.  As of today, 20 states have announced plans to re-open their economies in the next few weeks, with West Virginia being the most recent to announce. These states are 33% of US GDP and the largest of these states is Texas.  By our analysis, 6 of these 20 have shown sustained and pervasive improvements in case count (see below) but this doesn't mean the other 14 states are not correct to open.  Rather, we believe there are actually another 11 states that should be added to the 20 already -- meaning as many as 31 states should consider opening in the next few weeks. This excludes NY state.

On the healthcare side, NY Gov. Cuomo announced the results of a second serological study (this time 7,500 tests) and shows prevalence 10X official estimates and affirms mortality for NY state is 0.56% or so, way less deadly than the 5%-10% seen in official stats.

The rising opportunity cost of being "undecided" or "sidelined" on stocks...
The stock market, in the meantime, remains resilient, closing 100 points the critical 50% retrace line (2,793) and in the face of a healthy high-yield market, argues that equities have upside.  This despite what we sense as widespread "uncertainty" about equities and thus, many investors remain sidelined or "undecided." 

The past 4 weeks has been the most devastating gauntlet for equities -->
- COVID-19 pandemic,
- World economy shuts down, 
- OPEC blows up,
- worst GDP print since the Great Depression,
- 6mm unemployed claims,
- WTI near contract goes negative at -$48 per barrel (how does that happen?)
- 1Q2020 EPS missing by 20%

Yet, the S&P 500 has managed to claw back >50% of its losses and NASDAQ is now up YTD.  This resilience is telling that the consensus narrative of "economy gonna tank so gets out of stocks" is overly pessimistic.  And as we highlight at the end of this note, there are positive tailwinds building as we move into May.  We realize many investors were understandably expecting a "retest" of the March 2020 lows and potentially break below 2,200 towards 1,700.  This could happen, but is there another gauntlet of headwinds worse than what we saw in the past 4 weeks? If not, we think it less likely to retest the lows.


POINT #1: NY announces 2nd serological study affirms prevalence 10X the "official estimate" -- NYC est. 25% prevalence.  Why is NYC still closed?
Gov Cuomo in his press briefing today announced the results of the second serological study (using antibodies).  This second study is expanded with 7,500 participants and is also conducted 1 week after the first study (results are announced two weeks after the testing completed).  The results are consistent with the first study:

- NY state overall is estimated to have 15% of the population (+100bp from 13.9% prior study) and is 10X the official rate.
- NYC is now estimated to be 24.7% from 21.2% or up 350bp in the period between the studies.  This again is 13X the official rate.
- 6 of 6 studies (below) show that using anti-body studies, the prevalence of COVID-19 is 10X to 50X to 85X greater than realized.

As noted previously, this has big implications for understanding disease severity (most are therefore showing no symptoms) and the lower "death rate" as the number of cases is vastly higher. And we also think this suggests policy options should change, with treatment > vaccine and treatment arguably > testing.  

A FSI Macro, or FSI Pro subscription is required in order to access this content.
If you are already a member at FS Insight, please If you don’t have a subscription to FS Insight yet, you can sign up below.

We accept crypto via BitPay for yearly subscriptions.

Choose one of our yearly plans to save nearly 15%

    • Macro + Crypto
      FSI Pro
      The Complete Package
      FSI Macro + FSI Crypto
      from
      $
      249
      /mo
      billed anually
      First Month Free!
    • Macro
      FSI Macro
      from
      $
      199
      /mo
      billed anually
      First Month Free!
      What's included?
      Webinars and Media
      Webinars
      We host over 12 LIVE webinars per year with our research team and high-profile special guests. Incredible value and market insights!
      Weekly
      Coming Soon
      Fireside Chats
      Weekly interviews with our research heads about market opportunities and important updates.
      Research
      Weekdays
      Tom Lee's First Word
      The best market research out there -- on a near-daily basis.
      On market events
      Tom Lee's Intraday Word
      These are released periodically after crucial market developments.
      Daily
      Daily Technical Strategy
      Daily commentary on market trends and short term opportunities.
      Weekly
      Wall Street Whispers
      Exclusive insights based on discussions with institutional clients.
      Weekly
      Quantitative Strategy
      Quantitative market research utilizing industry-leading analytical methods.
      Weekly
      US Policy
      Weekly update on developments in Washington DC and how they may impact Wall Street.
      Weekly
      Weekly Roadmap
      Weekly summary of market events and updates on our key theses.
      Earnings season
      Earnings Daily
      A multi-faceted update of earnings developments.
      Updated bi-weekly
      Signal From Noise
      Highlights timely market themes and sectors with corresponding stocks, cutting through the day-to-day market “noise” for a distinct perspective.
      Stock Lists
      Updated quarterly
      Granny Shots
      Thematic investment stock picks that aim to outperform the S&P 500.
      Updated monthly
      Brian’s Dunks
      Single stock pics that are poised to outperform the index by leveraging sector outperformance and earning revisions strategies.
      Updated monthly
      FSI Sector Allocation
      A sector allocation strategy that is designed to outperform the S&P 500 while taking minimal risk.
      Updated monthly
      Factor Strategy
      List of ETFs based on quantitative models that should outperform the S&P 500 on a monthly basis.
      Updated monthly
      Newton's Upticks
      Technically derived, intermediate-term picks of attractive risk/reward opportunities from the S&P 500.
      And More!
      FSI Academy
      Our main goal is to make you a better investor! This series will guide you through key financial concepts and topics in an understandable way.
      Community Questions
      We gather your inquiries and answer them in the most scalable way. Hear directly from our research principals!
      Community Interviews
      Get questions answered directly by our research heads and guest speakers.
      Get access to all the macro research on FS Insight
      First Month Free!
    • Crypto
      FSI Crypto
      from
      $
      99
      /mo
      billed anually
      First Month Free!
      What's included?
      Webinars and Media
      Webinars
      Ongoing webinars exploring crypto opportunities, in depth research, and exclusive research offerings from our team of analysts and leading cryptocurrency firms.
      Weekly
      Crypto Chats
      Digestible videos expanding on important market events and metrics that are shaping cryptocurrency markets.
      Research
      Daily
      Crypto Daily Report
      Stay on top of the crypto markets with macro commentary, technical analysis, and the most relevant news.
      Intra month
      Crypto First Word from Tom Lee
      Hear directly from Tom Lee about important cryptocurrency developments.
      Weekly
      Crypto Technical Strategy
      From Bitcoin, Ethereum and Solana to other coins, our Head of Technical Strategy highlights important price movement to help give you an edge.
      Weekly
      Crypto Weekly
      A must-read summarizing our key thoughts about the crypto market, price action, and developing trends.
      Weekly
      Funding Fridays
      Are you looking for investment opportunities in the crypto space? We explore early-stage crypto opportunities in this note about where the smart money is being invested!
      Weekly
      Coming Soon
      Crypto Events
      Never miss another conference, a high-impact software update, or an event that could be market-moving!
      Intra-month
      Deep Research Reports
      Our consulting business delivers incredible deep research reports to highlight the economics and viability of exciting crypto projects.
      Update daily
      Bitcoin Misery Index
      Keep track of bitcoin sentiment to plan your digital assets strategy.
      And More!
      FSI Academy
      Our main goal is to make you a better investor! This series will guide you through key financial concepts and topics in an understandable way.
      Community Questions
      We gather your inquiries and answer them in the most scalable way. Hear directly from our research principals!
      Community Interviews
      Get questions answered directly by our research heads and guest speakers.
      Get access to all the crypto research on FS Insight
      First Month Free!

More from the author

Disclosures (show)

Don't Miss Out
First Month Free